Chandler Mayor: PSPRS Pension Burden “Not Sustainable”

Chandler’s Public Safety Pension Burden Increases $3 Million

Chris Coppola, The Republic | azcentral.com – February 10, 2015

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An early glimpse into the city of Chandler’s financial situation going into the next fiscal year offers more than a few positives, including an upward trend in revenue and healthy reserves for the unexpected.

What looms, however, are two issues out of the city’s control: The question of whether the state Legislature will opt to delay distribution of state shared sales taxes, a major part of the city’s annual budget to fund city services; and the continued escalation in the cost of funding pensions for public safety employees.

For 2014, overall city revenue collections were up 3.1 percent compared to 2013, as the economy continues to see improvement, according to a city report. The city’s transaction privilege tax — the local sales tax that contributes the bulk of city revenue — was up 2.8 percent year over year. The city’s preliminary projected revenue to fund ongoing needs could improve by about $2 million next fiscal year.

Beyond this, the city has about $15 million in its budget stabilization fund, set aside in case of an emergency, said Dawn Lang, the city’s management services director, during a City Council retreat held Feb. 6.

Among those unknowns that could impact the city is how the Legislature chooses to deal with the state’s budget deficit, estimated at about $500 million in the current fiscal year and about $1 billion for next year.

One possibility is that state lawmakers may choose to delay a portion of state shared sales tax revenue, allocated to Arizona municipalities based on population, to help balance the state budget. The city currently estimates such a move could have a $600,000 impact on the city.

“We’re still seeing that we’re going to have surplus,” Lang said.

Another factor is a projected increase in the city’s contribution to the Public Safety Personnel Retirement System, which funds pensions for police and fire workers, and the Arizona State Retirement System, which funds pensions for non-public safety personnel.

“It’s not sustainable,” Mayor Jay Tibshraeny said, citing the need for a reform in the public safety retirement system.

The city currently is paying about $15.5 million annually into the funds. The city and employees pay an equal percentage into the ASRS fund. However, the public safety fund differs in that a city’s percentage increases as the number of retirees, who no longer pay into the system, increases. That has fueled escalating costs and projections of the continued trend as more retirees enter the system.

Lang said the city projects it will need to increase the rate it pays for police and fire by $2.7 million annually in the next few years. For now, however, the city expects to increase by about half that amount in the next fiscal year.

“It’s not sustainable,” Mayor Jay Tibshraeny said, citing the need for a reform in the public safety retirement system. Tibshraeny said any reforms will require a collaboration with public safety groups and likely would not be able to include changes for current employees.

The council will have more detailed budget workshops in the coming weeks as it further prepares its budget for the 2015-16 fiscal year, which begins July 1.